The case for strong trademarks in the Brazilian luxury industry

By

Júlio Regoto

jregoto@mattosfilho.com.br

Felipe Bueno

fbueno@mattosfilho.com.br

6 Mar 2017 , 10:00pm

The last two years were very challenging for Brazil. The country faced several changes in the political, social and economic landscapes. All sectors and industries were affected by what has being said to be the biggest recession in the country’s recent history. The economic crisis changed many customers shopping habits, including high-profile customers. Nonetheless, the Brazilian luxury industry closed 2016 with a total of BRL 12.47 billion in revenues, an increase of 5.1% in comparison to 2015

Companies with a solid brand name in the market appear to be more successful in fighting back a slow growth and weak sales. Automakers such as Jaguar, Land Rover, BMW, Mercedes-Benz and Audi kept their plans of investment and expansion in Brazil, despite steady drops in sales. With experts projecting an economic recovery starting in 2017, the luxury industry is hoping that stronger consumer confidence will lead to a return to growth rates in 2017.[1]

In this scenario, it appears that consumers prefer established players with strong trademarks. As Brazil follows the first-to-file principle for trademark protection, it is crucial to duly file and register trademarks with the Brazilian Patent and Trademark Office (“BPTO”). The property of a mark is only acquired by means of a valid registration with the BPTO in accordance with the provisions of the Brazilian Intellectual Property Law (“BIPL”), which grants the titleholder exclusive rights for its use throughout the national territory.

Trademark in Brazil

In 2016, 166,368 trademark applications were filed with the BPTO: 95,202 were service marks (57%), 69,756 product marks (42%), 1,053 collective marks (0,6%) and 357 certification marks (2%). Brazil represented 83% of the applications, the United States 5% and Germany 2% of the total applications in that year. France, Switzerland, United Kingdom, Mexico, China, Japan and Republic of South Korea, each accounted for 1%.[2]

Protections and limitations

Please note that only visually perceivable signs may be registered as trademark in Brazil. Trademark registration is available for word marks, design marks and word and/or design mark. There is no straightforward protection for sound or olfactory trademarks. Trademarks usually take an average of two and a half years to be registered in Brazil. Registration is valid for ten years and renewable for successive and equal periods.

Appropriate trademark protection gives its owner exclusive rights on the trademark in the country. In this regard, the trademark owner can defend its trademark against third-parties unauthorized use and exploitation, including the right to enforce such trademark registration against parallel importation of goods and the selling of knockoff copies in counterfeit markets.

Moreover, trademark protection grants its owner the right to license or assign the trademark (or trademark application) for a consideration, which may come in handy in times of crisis. In fact, there are several examples of relevant trademarks in the luxury industry that were assigned to third parties in Brazil by means of well-drafted contracts.

Case studies

In 2008, 70% of the fashion brand “Herchcovitch;Alexandre” owned by Brazilian designer Mr. Alexandre Herchcovitch was acquired by the fashion holding company InBrands for an undisclosed amount. In February 2016, Mr. Herchcovitch left the company, leaving his name and trademark behind. Due to obligations stipulated in the purchase agreement, Mr. Herchcovitch cannot use his former trademarks or his name as a trademark to identify products.

In this case, the contractual obligations set forth in the purchase agreement, back in 2008, were extremely relevant to allow the InBrands group to continue using the trademark “Herchcovitch;Alexandre” even though Mr. Herchcovitch is no longer part of the business.

The same has happened to Mr. Tufi Duek, former owner of the holding TF Modas (owner of the trademarks Forum, Triton, Forum Tufi Duek and Tufi Duek). In 2008, Mr. Duek sold the totality of his business along with his trademarks to AMC Têxtil. After the sale was concluded, Mr. Duek could not use any of these trademarks (or his name as a trademark). However, in 2014, Mr. Duek launched a new collection with his daughter named “Carina Duek by Tufi Duek” and AMC Têxtil sought an injunction to prevent such use.

Conclusion

Both examples are representative of the importance of trademark protection and its value during an acquisition.

Finally, although licensing can become a major stream of revenue in Brazil, in contrast to direct exploitation of the trademarks in the business, international trademark licensing is subject to the rules and regulations issued by the BPTO. For instance, trademark license agreements must refer to trademarks registered with the BPTO[3] and a trademark license agreement must be approved by the BPTO to allow remittance of funds abroad.

[3] Trademarks application may be licensed in Brazil. However, the remittance of payments from trademark licenses will only be valid after the registration of the respective trademark by the INPI. Retroactive payments before the grant of the trademark registration are not allowed.